EUR/USD: Downward Correction Likely Limited

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EUR/USD Current Price: 1.1154

  • European Markit Manufacturing PMI revised higher, but still indicating contraction.
  • US calendar to remain light this Monday, with upbeat sentiment leading the way.
  • EUR/USD unable to break through 1.1180, despite positive market mood.

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The EUR/USD pair is trading near the 1.1180 level, confined to a tight range ever since the day started. The FX market has started the week in slow-motion, exacerbated by a holiday in Japan and the absence of relevant data. Still, the overall sentiment remains positive, lending support to the shared currency.

Growth keeps slowing in the EU

Encouraging headlines correlated to the US-China trade relationship were reinforced by comments from the US Commerce Secretary Wilbur Ross, who said that he hopes enough progress has been made in trade negotiations with the Union to avoid tariffs on EU imported vehicles.

In the data front, Markit released the final versions of October Manufacturing PMI for the European Union, most of them upwardly revised from preliminary estimates. The German Manufacturing Index came in at 42.1, better than the expected 41.9, although confirming contraction in the sector with the index barely bouncing from a ten-year low of 41.7. For the whole Union, the index resulted at 45.9 from the 45.7 previously estimated, also indicating slowing growth in manufacturing output entering Q4. The US will release today the October ISM-NY Business Conditions Index, expected at 45.8 from 42.8, and September Factory Orders, these last seen down by 0.5% after falling 0.1% in the previous month.

EUR/USD short-term technical outlook

The EUR/USD pair is trading above a daily low of 1.1149 but below the 1.1180 resistance level, and the 4-hour chart shows that it’s barely resting on a bullish 20 SMA, which keeps advancing above the larger ones. Technical indicators, however, continue easing from last week highs, with the Momentum having entered negative territory and the RSI losing gaining downward strength around 55. A downward corrective seems likely on a break below 1.1145, although buyers will likely defend the downside at around 1.1110/20.

Support levels: 1.1145 1.1115 1.1070

Resistance levels: 1.1180 1.1220 1.1250


Equities Contributor: FXStreet

Source: Equities News

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